Question

The income summary account shows debits of $19,000 and credits of $20,000. This results in a:

a. Net income of $1,000
b. Net loss of $1,000
c. Net income of $19,000
d. Net loss of $19,000

Answer 1

The correct answer is a net income of $1,000 since the income summary account shows credits exceeding debits by that amount, indicating that the company made more than it spent.

Step-by-step explanation:

When an income summary account shows debits of $19,000 and credits of $20,000, this means the company has a net income. The income summary account is used to show the performance of a business over a period of time. Debits represent expenses and losses, while credits represent revenues and gains. Since the credits exceed the debits, you would calculate the difference between the two to determine the net result.

In this case, there is a net income of $20,000 (credits) - $19,000 (debits) = $1,000. Therefore, the correct answer is: a. Net income of $1,000.